Correlation Between Itay Financial and Axilion Smart

Can any of the company-specific risk be diversified away by investing in both Itay Financial and Axilion Smart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Itay Financial and Axilion Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itay Financial AA and Axilion Smart Mobility, you can compare the effects of market volatilities on Itay Financial and Axilion Smart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Itay Financial with a short position of Axilion Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itay Financial and Axilion Smart.

Diversification Opportunities for Itay Financial and Axilion Smart

0.16

Correlation Coefficient

Itay Financial  Axilion Smart

Average diversification

The 3 months correlation between Itay and Axilion is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Itay Financial AA and Axilion Smart Mobility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axilion Smart Mobility and Itay Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Itay Financial AA are associated (or correlated) with Axilion Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axilion Smart Mobility has no effect on the direction of Itay Financial i.e., Itay Financial and Axilion Smart go up and down completely randomly.

Pair Corralation between Itay Financial and Axilion Smart

Assuming the 90 days trading horizon Itay Financial AA is expected to generate 0.99 times more return on investment than Axilion Smart. However, Itay Financial AA is 1.01 times less risky than Axilion Smart. It trades about 0.17 of its potential returns per unit of risk. Axilion Smart Mobility is currently generating about 0.04 per unit of risk. If you would invest  32,780  in Itay Financial AA on October 8, 2024 and sell it today you would earn a total of  3,170  from holding Itay Financial AA or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Itay Financial AA  vs.  Axilion Smart Mobility

Itay Financial AA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itay Financial AA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Itay Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Axilion Smart Mobility

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Axilion Smart Mobility are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Axilion Smart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itay Financial and Axilion Smart

The main advantage of trading using opposite Itay Financial and Axilion Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itay Financial position performs unexpectedly, Axilion Smart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Axilion Smart will offset losses from the drop in Axilion Smart's long position.

The idea behind Itay Financial AA and Axilion Smart Mobility pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.